The Japanese Economy Is Showing Signs of Slowing
July 12th, 2019
In a Bloomberg update they gave a recap of some numbers that give rise to the indication that the trade war is having its impact on economies around the globe. Export-reliant Singapore’s gross domestic product unexpectedly shrank an annualized 3.4% in the second quarter, the biggest decline since 2012. China’s exports slowed more than forecast, and imports plunged 7.3% overall—down a whopping 31.4% with the US. The latter may reflect the lack of agricultural purchases.
Japan also contributed some poor data supporting the idea that the trade war is having its impact. Japan’s core machinery orders fell for the first time in 4 months, which was the largest drop in 8 months which give some evidence of global trade disputes dampening corporate investments.
Crude oil and refined fuel product prices closed slightly lower yesterday with RBOB gasoline leading the way down by 0.8% for nearby futures trading month. Price rose in the early morning trading hours due to uncertainty of Tropical Storm Barry hitting Louisiana on Saturday and potential damage to oil rig production platforms. A total of 191 production platforms in the Gulf of Mexico were evacuated due to Barry. Approximately 53% of Gulf oil production and 45% of natural gas production have been shut in. Every tropical storm or hurricane is different and difficult to ascertain whether it will do damage to the supply side of do more damage to the demand side by flooding power plant generation.
OPEC forecasted in 2020 that the world would need only 29.27 million bpd, down 1.34 million bpd from this year. The IEA is also bearish on oil demand. As reported by Bloomberg News” World supply exceeded demand at a rate of 900,000 barrels a day during the first six months of 2019 as consumption proved far weaker than expected amid a faltering economy, the IEA said.” With the outlook for 2020 deteriorating, OPEC may need to reduce output to the lowest level in 17 years to keep markets in balance, the IEA said. These demand concerns keep the bears hopes up for some downside but in the near term the Tropical Storm/Hurricane Barry shutting down production and Middle East tension continue to concern the market and offer it support.
Iran’s Foreign Minister, Mohammed Javad Zarif, said there would be no negotiations with the US as long as sanctions are in place.
US crude exports are gaining traction in Europe as even Ukraine turns into a significant consumer of American barrels at the expense of Russian supplies. Ukraine received its first every barrels of oil from the US this month, as a tanker unloaded 80,000 tons of Bakken crude in Odessa on July 6th. The oil was sold by BP to Ukrtantnafta, which will receive a further similar amount of US crude around July 24th, and more purchases were likely in August.